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Conventional political trick runs afoul of economic diplomacy
Qazi Azad

          THE diplomatic correspondents of Dhaka newspapers, who were treated by the foreign minister with lunch last Sunday at the state guesthouse Padma, did not have agitating empty stomachs that could have upset their minds. So one has to readily believe what they subsequently reported in their papers as words of Foreign Minister Morshed Khan on that occasion.
The Foreign Minister told them, among others, that Bangladesh might impose countervailing duty to discourage imports following India's imposition of additional duty on Bangladesh's four items -- hilsha fish, saree, medicine and porcelain. Obviously, what he meant to say was that the government might consider imposing such duties on some import items sourced from India in retaliation to discourage imports from that country.
Yes, Bangladesh may consider imposing countervailing duties if the pre-conditions of the related quasi-judicial process that it would involve are fulfilled. Business is a vice or a virtue in which strange things happen -- enemies become bed-fellows and rivals can be friends. The European Union (EU) fights the United States of America (USA) and Australia that claimed to be the proxy of the USA in the southern hemisphere during the East Timor crisis, joins Brazil at the World Trade Organisation (WTO) to counter the EU and USA on some trade issues.
Curiously enough, the Indian government names supplementary duty as countervailing duty in its customs schedule in contradiction with the current international trade vocabulary in respect of meaning. The word "countervail" means "to act against with equal effect". In accord with that meaning, countervailing duty as per the vocabulary of the WTO means an additional duty realised by an importing country to neutralise the effect of subsidy on an import item, which is given by the exporting country to promote its market access using reduced price as the tool to knock down local products or imported rival products. This additional duty cannot exceed the value of the actual subsidy.
Essentially, it is a trade remedial measure, which can be taken only on having positive evidence of subsidised export by the exporting country and after conducting a hearing by the designated authority for such hearing in the importing country. The procedure requires that the exporting country concerned must be given the opportunity of being heard, the allegation of the subsidised export to be proved and the value of subsidy to be determined. It also stipulates that an importing country will acquire the right to conduct such hearing only on having documents establishing that its local industries manufacturing the same or similar products have been adversely affected by the subsidised export of the item by the exporting country. The damage has to be real in the form of business loss over a considerable period, which has to be supported by documentary evidence. There is no scope for imposing this particular duty barely on consideration of national interest or as a retaliatory measure. Evidently, it is an exacting process whose requirements are very difficult for small economies like Bangladesh and their small industries to satisfy.
There is yet no instance of Bangladesh having imposed countervailing duty on any import item. It is not an act of generosity on the part of this country; rather it is a manifestation of its inability to do so. The very agreement of the WTO on this subject has been so skilfully crafted that it forestalls the chance of small animals ever becoming the king of the forest like the lion. Be not offended for equating human beings with animals in a world, which is supposed to be the habitat of sovereign equals -- if not equals as persons but equals as nations, but, in reality, it has more equals among equals and the lesser equals are hardly treated any better than beasts in many cases by the more equals.
In this context, it is important to understand the purpose of imposing countervailing duty. This is more so for a least developed country (LDC) like Bangladesh. The LDCs have otherwise very little diplomatic clout, particularly in international trade-related matters. When their policy-making personnel talk about countervailing duty, they do need to understand what it implies in order to lend substance or credence to what they say. Now that the country has given emphasis, as it should, on economic diplomacy, its key functionaries in the ministry of foreign affairs are expected to be as knowledgeable on trade matters as the leading trade experts.
In this connection, if what Foreign Minister M. Morshed Khan told journalists at the state guesthouse was meant for only domestic consumption -- to pacify a people angered by the Indian imposition of additional duty on four of their few major export items -- apparently done to squeeze market access, he just resorted to a conventional political trick. Its result locally will be as good as what was otherwise inevitable. But his words would convey to the Indian government that they have been accused of covertly subsidising some of their export items that are consigned to Bangladesh. Mr. Khan would have done well if he spoke with caution. But if he meant what he said he should have by now the evidence of actionable subsidy, given to some of its export items by New Delhi. Does he possess any such evidence?
Mr. Khan must not speak in terms of retaliation unless such evidence is in his possession. He should neither fear to seek remedies for genuine national grievances. Does he regularly check whether trade matters really receive genuine attention of the accredited Bangladeshi diplomats under him? Can or do these diplomats procure for him and relevant government ministries the documents essential from countries to which they are accredited to start anti-dumping or countervailing investigations? Has the foreign ministry procured the Indian notifications that imposed additional duty on hilsha fish, saree, medicine and porcelain through its diplomats? If these notifications are not country specific, as the Indian High Commissioner in Dhaka said the other day -- apparently to educate us, the foreign minister has no case to go to Geneva to raise an issue with the Dispute Settlement Body of the WTO for violation of a GATT rule --the most favoured nation principle, which prohibits imposition of country-specific duty. But he still has a case to take up with his Indian counterpart for his intervention. The Indian imposition of additional duty on imported medicine and porcelain may be all right because there are many other exporting countries of these products. But none other than some neighbours of India export hilsha fish and sarees to that country. If these items are also subjected to additional duty, how will these countries -- particularly Bangladesh, reduce their trade imbalance with India?
The Indian High Commissioner in Dhaka said that the particular items have been subjected to additional duty to augment her country's revenue income. When India is having her record foreign exchange reserve and a growth rate hovering around 8.0 per cent, India is in no great need to impose additional duty on hilsha fish and saree? Is India then mounting pressure on this country for signing a bilateral free trade agreement? Ms Beena Sikri, of course, will say -- no. The Bangladeshis who are busier fighting among themselves, being caught up in the recalcitrant sediments of history, will have to make out the reply on their own to grasp the implications.
Social scientists who have a tendency to brand their individual subject simultaneously as science and art-- science for this reason and art for that - will perhaps define diplomacy as the art of persuasion with coherent, mutually supportive and logical arguments. The hard nuts among them may say that diplomacy is a science--quoting experts on international relations, who maintain that war is an extension of diplomacy. The logic of arms--the products of science, settles issues between nations when the force of words fails to resolve them.
That could be the reason why Ms. Madeleine Albright on being appointed the US Secretary of State by President Clinton in her speech of acceptance said, "The United States must have a world class diplomacy to match its world class military to retain its supremacy in the world".
Those who are involved in policy-making in the ministry of foreign affairs in a country like Bangladesh do need to know their subject -- particularly, the trade-related multilateral rules, thoroughly well and be masters in persuasion. Otherwise, they will fumble in discharging their functional responsibilities and, with that, shall fumble Bangladesh in pursuing its interests globally.
Globalisation presupposes that only the fittest will survive. The rest will go down under the heavy wheels of the bulldozing competition and reduce to modern slaves to seek free movement of labour across national boundaries for survival. Politics and diplomacy in this ruthlessly competitive time have to be competitive in quality and essentially development-oriented - not any more based on conventional rhetoric--if the nation has to survive well with self-respect.


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